Saudi misses out on joining anti-illicit funding body for now

DUBAI (Reuters) - Saudi Arabia has missed out on gaining full membership of the Financial Action Task Force (FATF) after the global body dedicated to fighting illicit money flows found the kingdom fell short in combating money laundering and terror financing.

The decision by the 37-member inter-governmental body is a setback for Saudi at a time when it is striving to bolster its international reputation in order to encourage foreign investors to participate in its huge transformation plan and improve financial ties for its banks.

But after undergoing a process called “mutual evaluation”, the kingdom was found to have a low or moderate level of effectiveness for 7 of the 11 criteria it was assessed on for anti-money laundering and counter terror financing, a FATF spokeswoman told Reuters.

“This means that Saudi Arabia will not be granted membership status at this point,” the spokeswoman said. “Nevertheless, since the mutual evaluation is close to being satisfactory, the membership process therefore continues.”

There was no fixed time frame for Saudi becoming a full FATF member as it will depend on how quickly it addresses the deficiencies identified in its evaluation, she said.

The government has taken steps to beef up its efforts to tackle graft and abuse of power, including last week amending an anti-corruption law to remove a 60-day statute of limitations for investigating allegations against current or former ministers.

Authorities also detained dozens of senior officials last November on Crown Prince Mohammed bin Salman’s orders, accusing them of crimes including money laundering although not of terror financing.

Most detainees were released after being exonerated or reaching financial settlements with the government, which says it arranged to seize more than $100 billion through such deals.

The mutual evaluation report, published last week, said banks filed reports of suspicious transactions regarding a number of the more than 200 individuals involved in the crackdown.

On a general basis, the kingdom had developed a good understanding of its money laundering and terror financing risks and authorities had introduced measures to address those areas, the report said.

However, Saudi was not effectively investigating and prosecuting individuals involved in larger scale money laundering activity, the report noted, adding that while such investigations have significantly risen in recent years, they remain too low.

Authorities were also not effectively confiscating the proceeds of crime at home or abroad, where the large majority of proceeds generated are estimated to end up, it said.